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Patricia A. Kunkel, Individually, and As Executor of the Estate of v. Cuna Mutual Insurance Society

October 18, 2011

PATRICIA A. KUNKEL, INDIVIDUALLY, AND AS EXECUTOR OF THE ESTATE OF FREDERICK L. KUNKEL A/KA FRED KUNKEL, PLAINTIFF,
v.
CUNA MUTUAL INSURANCE SOCIETY, DEFENDANT.



The opinion of the court was delivered by: Magistrate Judge King

Judge Graham

OPINION AND ORDER

This matter is before the Court on plaintiff's motion for leave to amend the complaint to add Hopewell Federal Credit Union ("Hopewell") as a defendant. Plaintiffs' Motion for Leave to Amend their Complaint and Add the Hopewell Federal Credit Union as a Party Defendant, Doc. No. 10 ("Motion to Amend").

I. BACKGROUND

Plaintiff, a resident of Ohio, filed the original complaint in the Court of Common Pleas in Licking County, Ohio. Complaint for Breach of Insurance Contract and Bad Faith, Doc. No. 3. The Complaint named as the only defendant CUNA Mutual Insurance Society, identified as a resident of Iowa, and alleged that defendant issued an insurance policy to plaintiff and her husband but denied her claim for benefits in bad faith. The Complaint asserts claims of breach of contract and bad faith. Id.

¶¶ 1, 6, 8. Although the Complaint identified Hopewell as defendant's agent "[a]t all times relevant to the allegations," plaintiff did not advance claims against Hopewell or allege that it was Hopewell that issued the policy. Id. On June 7, 2011, defendant filed a notice of removal premised on diversity jurisdiction. Defendant's Notice of Removal of Cause, Doc. No. 1.

Plaintiff later filed the instant Motion to Amend, a two-page document that includes no legal citations. Doc. No. 10. The proposed amended complaint, which would again assert a breach of contract claim and a bad faith claim, would join Hopewell as a defendant and would add one minor allegation: The breach of contract claim now alleges that the certificate of insurance "was never to delivered to the borrowers as required by Ohio law." Amended Complaint for Breach of Insurance Contract and Bad Faith, Doc. No. 10-1, ¶ 6 ("Amended Complaint"). In her supporting memoranda, plaintiff argues without elaboration that Hopewell is a necessary party on the basis of Hopewell's alleged agency and the alleged failure to deliver the certificate of insurance. Motion to Amend, p.2; see also Plaintiffs' Response to Defendant's Opposition to Plaintiffs' Motion to Amend, Doc. No. 17, p.1.

In response, defendant argues that plaintiff is attempting by her motion to destroy diversity jurisdiction by adding a non-diverse party. Defendant's Opposition to Plaintiff's Motion to Amend and Correct, Doc. No. 13 ("Opposition to Motion to Amend"). Defendant argues that denial of the Motion to Amend is appropriate under 28 U.S.C. § 1447(e) because Hopewell is a non-diverse party and because the allegations concerning Hopewell are irrelevant to the claims for relief. Id. Defendant also argues against joinder under fraudulent joinder principles. Id.

Plaintiff does not dispute that Hopewell is a non-diverse party.

II. DISCUSSION

Pursuant to 28 U.S.C. § 1447, the Court "may deny" a request to add an additional defendant if the request follows removal from state court and "would destroy subject matter jurisdiction." 28 U.S.C. § 1447(e).

Although the Sixth Circuit has not addressed the standard that governs the application of 28 U.S.C. § 1447(e), it is clear from the language of the statute and its application by other courts that denial of leave to amend in order to join an additional party under the statute is discretionary. J. Lewis Cooper Co. v. Diageo N. Am., Inc., 370 F. Supp. 2d 613, 618 (E.D. Mich. 2005); Mayes v. Rapoport, 198 F.3d 457, 462 (4th Cir. 1999). Here, because plaintiff does not dispute that Hopewell is a non-diverse party, there is no question that its addition would destroy subject matter jurisdiction. The only remaining question is whether denial is an appropriate exercise of the Court's discretion.

In exercising the Court's discretion under 28 U.S.C. § 1447(e), courts have considered "the diverse defendant's interest in selecting a federal forum . . . together with four other factors: (1) the extent to which the purpose of the amendment is to defeat jurisdiction; (2) whether the plaintiff was dilatory in seeking the amendment; (3) whether the plaintiff will be injured significantly if the amendment is not allowed; and (4) any other factors bearing on the equities." J. Lewis Cooper, 370 F. Supp. 2d at 618 (internal quotation marks omitted).

Here, plaintiff does nothing to demonstrate the legal basis for Hopewell's addition or to refute defendant's contention that the allegations concerning Hopewell are irrelevant to the breach of contract and bad faith claims.*fn1 Plaintiff does not allege that Hopewell is a party to the contract of insurance that was allegedly breached and so cannot establish the breach of any contract between plaintiff and Hopewell. See Pavlovich v. Nat'l City Bank, 435 F.3d 560, 565 (6th Cir. 2006) ("To establish a breach of contract, a plaintiff must show that a contract existed, the plaintiff performed, the defendant breached, and the plaintiff suffered damages.") (citing Wauseon Plaza Ltd. P'ship v. Wauseon Hardware Co., 807 N.E.2d 953, 957 (Ohio Ct. App. 2004)). The bare allegation that Hopewell acted as defendant's agent is not enough to advance a cause of action for breach of contract against Hopewell based on the contract between plaintiff and defendant. See James G. Smith & Assocs., Inc. v. Everett, 439 N.E.2d 932, 935 (Ohio Ct. App. 1981) ("An agent who acts for a disclosed principal and who acts within the scope of his authority and in the name of the principal is ordinarily not liable on the contracts he makes."); Restatement (3d) Of Agency § 6.01 (2006) ("When an agent acting with actual or apparent authority makes a contract on behalf of a disclosed principal . . . the agent is not a party to the contract unless the agent and third party agree otherwise."). In addition, plaintiff does not allege that any of Hopewell's actions amount to an independent breach of contract. Amended Complaint, Doc. No. 10-1, ¶¶ 1, 5 (alleging only that Hopewell was involved in selling the insurance policy and submitting plaintiff's claim to defendant). Although plaintiff alleges without citation ...


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